Saturday, August 22, 2009

Fiscal Conservatism and the Soul of the GOP

The Texas governor on Arnold, Sarah, ObamaCare and the future of his party.

California needs a strong leader, says Texas governor Rick Perry. That strong leader, Mr. Perry thinks, needs to go to Sacramento and "take special interests out" of government. He needs to "make massive cuts" in spending and taxes. And he needs "to make major changes in the constitution," including tort reform.

What about Arnold Schwarzenegger? "Arnold—I think Arnold squandered that chance."

Six years ago, Mr. Perry's state underwent a critical tort reform that was codified in the state constitution. The payoff is that Texas is now outpacing California economically. According to the Texas Public Policy Foundation, between 1997 and 2006 Texas' economy grew an average of 4.3% while California's grew at a rate of 3.7%. But as of 2002 (to 2007), with tort reform in place, Texas' annual economic growth jumped to 5%, while California's remained essentially the same at 3.6%.

With a tan baseball cap hanging off one knee, Mr. Perry is proud to report that "Texas created more jobs in 2008 than the rest of the states—combined." As of July, the state, which taxes neither capital gains nor income, had an unemployment rate of 7.5%, two points below the national average, while California's hovered at 11.5%, two points above.

No wonder over half a million people flooded into Texas between 2000 and 2007. Meanwhile, 1.2 million residents left California in the same seven-year period.

The bottom line? Tax-and-spend governance is as bankrupt as California's bank account. By way of illustration, the governor replays a conversation he had with Rudy Giuliani during the presidential primaries.

They were talking about Michigan. "The Michigan governor was making statements about having to raise taxes so [they could keep] services at the level they were, instead of, like we did in Texas, cutting, not raising, taxes and cutting spending. There was a great difference in political philosophy. In Michigan, a liberal democrat raised taxes and kept their government programs at the same level. And guess what? Their economy continued into the toilet, it continued down.

"Our economy on the other hand [improved]—let me give you a great example: We had a $10 billion budget deficit when we got here in January of 2003. We cut that budget deficit; we did not raise taxes; we came back in '05, and we had an $8 billion surplus. That's how fast it can happen.

"That's the reason I have hope, not only for the country, but for states like California that are in dire financial predicaments. You can turn it around in a hurry, but you have to make hard, principled decisions."

Mr. Perry insists that Texas' success "is a broader story than just tort reform." As governor, Mr. Perry has honed in on four policy issues he believes are drawing people and businesses to the state in record numbers. Businesses like Medtronic and Caterpillar, to name two, are "coming here [because] we haven't spent all the money, the taxes are low, the regulatory climate is fair—they won't be frivolously sued—and they know when they get here that they'll find a skilled work force."

But do Mr. Perry's pro-business, low-tax policies mean that Texas' investments in education and other crucial areas are lagging behind? Just the opposite: While California slashed education funding this year, Mr. Perry notes that a Texas "grant program for kids to go college and university . . . expanded by 44%" this last session. In that same session, the Lone Star State cut taxes for small businesses.

And when it comes to the Obama administration, Mr. Perry doesn't mince words: "To me, this is one of the great Frankenstein experimentations in American history. We've seen that movie before. It was from 1932 to 1940."

***

Sitting in his white tee and running shoes, the governor begins guiding me along the path that led him from the small Texas town of Paint Creek, where he grew up, to Austin, the state's capital. "I grew up in a house with no running water, 16 miles from the closest place that had a post office," he recalls. "I had a very parochial view of the world."

He became an Air Force pilot and went off to countries like Saudi Arabia, Iran and Italy, returning to Paint Creek in 1977—only to grow restless on the family farm. He sought a political outlet.

In 1985, Mr. Perry represented a rural West Texas district in the state legislature; in 1990, he was elected state commissioner of agriculture; in 1998, he was elected lieutenant governor under then-Gov. George W. Bush. He became governor when Mr. Bush won the presidency in 2000, and Mr. Perry was chosen by the voters themselves in 2002 and 2006.

Mr. Perry now has the distinction of being the longest-serving governor in Texas history. The state's senior U.S. senator, Kay Bailey Hutchison, announced this month that she will challenge Mr. Perry's unprecedented bid for a third term. She's running on a platform that attempts to appeal to women and moderate conservatives, and she criticizes the governor's rejection of $555 million in federal stimulus funds—even though she opposed the stimulus herself.

The 2010 gubernatorial primary will be a slugfest between the two biggest names in Texas politics. But Mr. Perry claims he isn't paying too much attention. "She's in Washington, I'm in Texas" he says, shrugging his shoulders. "I'm busy running a state . . . I'm a results guy and that's process . . . It's important to run the state. Politics will take care of themselves."

Naturally, the governor is concerned about what is happening in Washington. When I ask him if Mr. Obama's policies would send this country down the same path as California, Mr. Perry lunges forward, "If you want to know what this guy's policies are doing, it's been written about before."

"Read that book. Read this book," he says, gesturing toward the nearby table. I see something from Weight Watchers and a Harry Potter paperback—but the governor is referring to the "The Road to Serfdom" by Frederick Hayek and "The 5000 Year Leap" by W. Cleon Skousen. "Read Amity Shlaes's 'The Forgotten Man.' Amity's book is very eye-opening—scary—for me."

To the governor, one of the scariest policies is the national health-care bill. "I think it'll die. I think Americans are catching on. That's the reason that Rahm Emanuel and his guys were trying to push it through so fast, because they know [that once] Americans see what this is going to do—limiting their access to health care, costing them more—they're going to oppose it. And interestingly, you know who's against this more than anybody? The elderly. They figured this bill out.

"They like what they got right now, they like their access to health care. Particularly, the aspect of this [bill] that has to do with end-of-life decisions . . . are pretty cold-hearted in my opinion. You're a little too old to be spending money on, so we're just going to put you over here in the 'gonna die' category. 'Bye.' That's pretty gruesome and scary to people that are my mom and dad's age."

Another important reason Mr. Perry believes the bill is flawed is because it ignores tort reform. "To talk about health-care reform and not talk about tort reform is like whistling past the cemetery. . . . In this administration's case, it's because they're bought and sold by the trail lawyers." The governor puts his cap back on, adding, "I'll be the pope before we get tort reform with this administration."

As opposed to a federal and "vanilla . . . one size fits all" government, the governor's "goal is to have states compete against each other. I don't want to look like Connecticut, no offense, I don't want to look like Oklahoma, I don't want to look like California. I want to be uniquely Texas. And that's not to diss anybody else."

Though the GOP has been hurting in recent years, the governor says it can make its "path to recovery substantially faster" if its members embrace something like the Texas model and vow to be "clear, committed fiscal conservatives."

Reflecting on his party's recent history he recalls, "They spent too much money. They acted like Democrats. They got up in 1994 and said elect us, here's our contract with America and here are the things that we're going to do. And Americans said, by gosh, that sounds good, we're for you, let's go. And you know what, they went and did it for a while. And then, we took over everything, the presidency, Congress, senate—shoot, man—they lost their way. . . . And they started being more focused on maintaining power. They had ethical lapses. They had moral lapses, but the big issue was they started spending like Democrats. When they passed that pharmaceutical bill for everybody forever—I mean, one of the most expensive entitlement programs that this country's ever seen before—we started on the road to hell."

He adds, "I love George Bush, [but] the previous administration's bailout, I happen to think, was as bad as any program on [Obama's] stimulus side."

Mr. Perry does not see social issues as the raison d'etre of the Republican Party. "You may elect me if I am pro-life. You may elect me if I'm pro-family values. But you probably will not elect me if I'm not a proven fiscal conservative."

Recently, Republican Sen. George Voinovich of Ohio complained that the GOP is "being taken over by Southerners." Mr. Perry responds with a laugh. "He's a piece of work, isn't he? 'You Southerners!'" he points his finger in imitation. The political divide, the governor insists, is between "mushy, middle of the road" Republicans and clear, devoted fiscal and social conservatives, like himself and Sarah Palin.

On that last point, he states emphatically, "I love Sarah Palin, I love her positions, I think she was a good governor. . . . I want her to be engaged in this rebuilding of the Republican Party. . . . She is substantially more the face of this country than some other people who might want to be the face of the Republican Party. To me she's the face of America. I mean she's a hard worker, she didn't come from money, she didn't come from privilege, she just worked hard. . . . I have not seen another person who invigorated the Republican base [like she did] with the possible exception of Ronald Reagan in 1976—the speech he made at the Republican Convention. People were looking around and saying, 'we nominated the wrong dude.'"

One speed bump along the GOP's path to recovery could be demographics. In 2004, Texas became a minority majority state, a trend that's predicted to go national within a generation. In 2020, the Hispanic population of Texas may outnumber the White population.

While Texas has been GOP-controlled since 1994, some say Texas may soon change from red to purple to blue because of the demographic shift.

The governor disagrees, and believes even the hot button issues of illegal immigration and amnesty have been mishandled by national leaders. "The McCain folks totally blew it in my opinion on their immigration deal the moment they mentioned the word amnesty. When the word amnesty came in—American Hispanics don't want anybody getting amnesty. 'If you want to be an American citizen, get it the way I got it,' that's how they think. The Hispanic voter is a very intuitive and a very expansive individual, one issue doesn't drive him. . . . They are strong family values people, they are religious, they are patriots, they are hard working. Gee, sounds like the GOP to me."

Mr. Perry thinks education will help the GOP face the demographic trend. An educated work force, says the governor, will embrace the Texas model and will say so at the ballot box.

And his state's ballot box is the only one he's worrying about. Mr. Perry insists he does not plan to take the Texas model to the nation's capital one day. "Unless my family is at gunpoint, I will not go to Washington, D.C."

Leading me out the door, the governor explains, "Washington is not the place that great change is going to occur in America. It will occur in the laboratory of innovation called the states. I want to be a part of that."

Tuesday, August 18, 2009

"Yesterday, I chartered a sailboat so my family and I could spend a couple of hours out on the waters off Nantucket. The captain of the boat met us at the town pier, loaded us onto a small skiff, and then took us to a mooring out in the harbor, where the boat was waiting.

He explained to us that he would prefer to keep his sailboat at the pier, which would make loading and unloading passengers much easier, but he could not get a space there. Every year, he told us, the town has a lottery to allocate the right to rent one of the scare docking slots. For quite a few years, the captain has been putting his name into the lottery, but he has never won. "There are just not enough spaces," he said.

Ever the economist, I replied, "It seems to me that the price isn't high enough."

"Well, actually," the captain said, "if you want to pay more, you can go down there." He pointed to the next dock over.

Apparently, next to the town pier is another pier that is privately owned and operated. The price for a docking space there is about five times as high as it is at the town pier. But there is never any significant shortage. Anyone can sign up for a slot, as long as you are willing and able to pay.

What a wonderful illustration of basic economic principles! In one way or another, scarce resources need to be allocated among competing uses. Free markets typically use the price system. Governments, often in the name of "fairness," seem to prefer other mechanisms, which don't always direct resources to their highest value use.

The sailboat ride was a bit of a bust, by the way. The day was warm and sunny, and the captain was a delightful storyteller, but the wind was not nearly sufficient for a good sail. Sadly, there are some shortages even the price system is not able to correct.

Question for Ec 10 students: If the town raised the rental price of a docking slot at the town pier, what would happen to the price at the private pier?"

Wednesday, August 12, 2009

Or one more year of life for your father or your wife? For your child?

In Great Britain, the government has settled on a number: $45,000.

That’s how much a government commission with the Orwellian acronym NICE has decided British government-run health care will pay for one additional year of life for a British subject.

Think it could never happen here? Then you need to pay closer attention to what Washington is planning for your health care.

British Government Bureaucrats Literally Decide if Your Life is Worth Living

The British single-payer bureaucrats arrived at the price of an additional year of life in the same way they decide how much health care all British people will get, through a formula called “quality-adjusted life years.”

That means that if you’re sick in Great Britain, government bureaucrats literally decide if your life is worth living and, if so, how much longer and at what cost.

If it’s more than $45,000, you’re out of luck.

A Well-Connected White House Advocate for Allocating Health Care Based on Perceived Societal Worth

In the highest levels of the Obama Administration there is a theory of how to ration health care that is troublingly reminiscent of the British system of “quality-adjusted life years.”

Dr. Ezekial Emanuel is a key health care advisor to President Obama and the brother of White House Chief of Staff Rahm Emanuel. Earlier this year, Dr. Emanuel wrote an article that advocated what he called “the complete lives system” as a method for rationing health care. You can read it here.

The system advocated by Dr. Emanuel would allocate health care based on the government’s perception of the societal worth of the patients. Accordingly, the very young and the very old would receive less care since the former have received less societal investment and the latter have less left to contribute.“Forstall[ing] the Concern that Disproportionate Amounts of Resources Will be Directed to Young People with Poor Prognosis”

“The Complete Lives System” would also consider the prognosis of the individual.

Quoting Dr. Emanuel: “A young person with a poor prognosis has had few life-years but lacks the potential to live a complete life. Considering prognosis forestalls the concern that disproportionately large amounts of resources will be directed to young people with poor prognosis.”

When fully implemented, Dr. Emanuel’s system, in his words, “produces a priority curve on which individuals aged between roughly 15 and 40 years get the most substantial chance, whereas the youngest and oldest people get chances that are attenuated.”

“Chances that are attenuated” is a nice way of saying the young and the old are considered less worthy of health care and, under this system, will get less.

Once Government Becomes the Provider of Health Care, Personal Decisions Become Public Decisions

The point is not that a health care rationing system like the one favored by Dr. Emmanuel will be implemented in the United States tomorrow.

The point is that, as in the British system, once government becomes the single payer or even the main payer of health care, what were once intensely personal decisions become public decisions. And as costs rise, government will look for ways to contain them.

The inevitable result of this pressure to control costs will be rationing, whether it occurs during this administration or the next. At some point, the government will be forced to deny care to those who don’t meet the latest “quality-adjusted life years” cost-benefit analysis.

So the decision on what treatment to pursue that once would have been made by you and your doctor is now made for you by a bureaucrat using a formula -- a formula to literally determine if your life is worth saving.

The Camel’s Nose Under the Tent of Health Care Rationing

Societies don’t arrive at this point overnight.

British health care was nationalized soon after World War II, but NICE, the health care rationing agency, wasn’t created until the late 1990s as a way to control costs.

Today NICE routinely denies Britons life-prolonging drugs that are deemed not “cost effective” -- drugs that are widely prescribed in America to treat cancer, Alzheimer’s disease and other serious conditions.

The result, studies show, is that Great Britain’s cancer survival rates are among the worst in Europe and lag behind the United States.

In America, Rationing Begins with Comparative Effectiveness Research (CER)

In our country, the road to dehumanizing, bureaucratic health care rationing begins with something called comparative effectiveness research (CER). It sounds completely innocent. In practice, CER means comparing different treatments for diseases to see which works best. And what doctor or patient would object to that, right?

The problem is that, in the context of a government-run health care system, comparative effectiveness research becomes a way to find a cheaper, one-size-fits-all approach to medicine that will limit health care choices for patients.

But don’t just take my word for it. Congressional Democrats included $1.1 billion in the Stimulus Bill for CER. Report language explaining the bill noted that the treatments found to be “more expensive” as result of the research “will no longer be prescribed” and that “guidelines” should be developed to manage doctors.

Congressional Democrats also killed several amendments to the current health care bill that would have prevented CER from being used to ration care. (To learn more about the common-sense amendments to the bill that have been blocked, click here).The Government Has Determined You Must Take the Blue Pill

President Obama innocuously described the intended result of comparative effectiveness research like this: “If there’s a blue pill and a red pill, and the blue pill is half the price of the red pill and works just as well, why not pay half price for the thing that’s going to make you well?”

Listen to what the President is saying here. He’s saying that the government is capable of determining which pill works best for you and should therefore only pay for that pill.

But this one-size-fits-all approach goes against everything modern medicine is learning about the genetics of the human body. Different individuals and members of different ethnic and age groups respond differently to treatments. More and more, treatment of diseases like cancer is highly individualized and based on a genetic analysis of both the patient and her disease. Science is leading us in one direction and the administration and the Congress are taking us in the other.

What if you get sick and your doctor says you need the red pill, but the government has determined that the blue pill is what works best for its budget? In a single payer health world, what do you do then?

Creating a Commission to do the Dirty Work

Government bureaucrats limiting health care choices is terribly unpopular of course, which is why politicians use terms like “comparative effectiveness research” instead of “rationing.”

Another method Washington uses to avoid complicity in health care rationing is the creation of government boards or commissions -- like Britain’s NICE -- to do the job for them.

President Obama has expressed his support for using the Medicare Payment Advisory Commission (MedPAC), a commission created to advise Congress on Medicare, to achieve cost savings under health care reform.

Because the commission’s decisions could only be over-ridden by a joint resolution of Congress, it would be virtually unaccountable to the people -- and nervous members of Congress could blame the commission for unpopular decisions.

Combine this kind of a commission with the “complete lives system” advocated by White House health care advisor Dr. Ezekial Emanuel and you end up with a government rationing board literally determining which Americans should live and which should die.

Just Trust the Government

Supporters of government-run health care dismiss these worries as alarmist. They argue that because their big government health care bill doesn’t overtly call for rationing, it is somehow illegitimate to talk about this danger.

But it is always legitimate to consider the long-term consequences of a government program. By refusing to have an honest debate of this issue -- to explore honestly the consequences of the “painful choices” that all supporters of government health care say must be made -- their argument boils down to nothing more than this:

Trust the government.

Trust the politicians who are passing 1000-page bills they haven’t read.

Trust the leaders who are demonizing the citizens seeking to express their disagreement by calling them “un-American.”

Trust the advisors who advocate sacrificing the weak and the old and then hide in the shadows.

Trust the government to know what’s best for the most intimate, most personal part of you and your family’s life: your health.

Monday, August 10, 2009

“You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that, my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it.”